Progress Report 2011 the LEGO Group

The LEGO Group Aastvej 7190 Billund Denmark Tel.: +45 79 50 60 70 Progress Report 2011 www.LEGO.com The LEGO Group

Annual Report

In the Annual Report you will find detailed information on the LEGO Group’s financial results for 2011. http://aboutus.lego.com Section GRI (Profile / Performance Indicator) GC (principle no.) Governance Good governance in a family-owned company 2.3, 2.6, 4.1, 4.2, 4.9 Board of Directors 2.3, 4.1, 4.2, 4.3, 4.7, 4.9, 4.10 Business integrity training SO3 Corporate Management 2.3, 4.1, 4.2, 4.6, 4.9 Creating value with four promises 4.8 Policies 4.9 Whistle Blower 4.4 10 The LEGO Foundation EC1 Related Foundations 4.16, EC10 Care for Children in Need 4.16, EC10 Care for Education 4.16, EC10 Care for LEGO Local Communities 4.16, EC10 Capital of Children SO1 Performance data 2.8, 4.16, EN1, EN4, EN8, EN22, HR2, LA1, LA7, PR2, 1-6, 8, 10 PR5, PR8 EC1, EC10 Notes to performance data 2.5, LA1, LA13 Definitions and calculation methods Assurance statement 3.13 GRI and Global Compact overview and index 3.12 Progress Report 2011 The LEGO Group Welcome to Progress Report 2011

This Progress Report 2011 and the Annual Report 2011 constitute the reporting commitments of the LEGO Group in 2011.

The purpose of the Progress Report 2011 is to provide our stakeholders with a fair and balanced picture of our sustainability efforts in 2011. The report provides an overview of our activities, practices, goals and results.

The Progress Report 2011 also serves as our annual communication on progress in sustainability, as required by the United Nations Global Compact. The report is the statutory statement on Corporate Social Responsibility according to section 99a of the Danish Financial State- ments Act.

The report is developed in accordance with the main reporting principles of the Sustainability Reporting Guidelines from the Global Re- porting Initiative (GRI). And we are inspired by the voluntary standard AA1000 Accountability Principles drawn up by the Institute of Social and Ethical Accountability (AccountAbility).

The basis of the report, the scope, and the materiality determination are all based on a dialogue with main stakeholders about issues that are material to them.

For the 2011 report, we have applied the same model as we have used during the last three years for selecting sustainability content.

Read more about this at http://aboutus.lego.com/sustainability

4 Table of contents

Setting the scene 04 Welcome to Progress Report 2011 05 Table of contents 06 2011 highlights 08 Sustainability – the LEGO way 09 Message from the CEO

Our Material Progress 2011

10 Our sustainability issues

12 Sustainable play

18 Environment

22 Climate

26 Employees

32 Stakeholder dialogue

36 Human Rights

39 Governance Our 2011 numbers and supporting information 41 The LEGO Foundation

45 2011 numbers and comments 49 Assurance statement and GRI

Progress Report 2011 is published for the LEGO Design: Operate A/S LEGO, the LEGO logo, the Brick configuration Group by Corporate Affairs and Operate A/S and the Minifigure are trademarks of the LEGO Print: KLS Grafisk Hus A/S Group. © 2012 The LEGO Group. Editor in chief: Charlotte Simonsen, Senior Director, Corporate Communication, Paper: Scandia 2000 and Gallerie Art Silk. Net Promoter, NPS and Net Promoter Score [email protected] Copies: 5,000 are trademarks of Satmetrix Systems Inc, Bain & Company and Fred Reichheld. Contributor: Operate A/S The collective CO² emission of 5,000 copies is 0.7 tonnes, which will be compensated according LEGO A/S to the UN Convention. Currently, the compensa- Aastvej 1 tion goes to a wind farm in India. DK-7190 Billund, Denmark Telephone: +45 79 50 60 70 Read more about our sustainability work here: CVR-no: 54 56 25 19 http://aboutus.lego.com/sustainability

No. 001 Residence: Billund KLIMA-NEUTRAL Reporting year: 1 January – 31 December 2011 TRYKSAG

Recycled

waste as percentage of total Product registered waste recalls0 88 85

0 Target Result Target 2011 2011 2012

Our recycled waste percentage shows the recycled quantities of waste compared to total quantities of waste.

In 2011, the LEGO Group once again reached its target of 0 product recalls. We calculate product recalls as launched products recalled from the market due to product safety issues. Product recalls are calculated per stock keeping unit. Injury rate 2.0 2.1 1.8 Target 2011 Result 2011 Target 2012

We calculate the injury rate as the number of occupational injuries per million hours that result in at least one day’s absence following the day of the injury.

2011 highlights

Building on the success of previous years, we set our- waste we recycle. In 2011, we recycled 88% of the total selves a series of ambitious targets for 2011. We have waste, compared to our target of 85%. made progress, but there are also targets we did not meet. A high degree of energy efficiency is important for us as it makes good sense for the climate, the environ- Because the safety of children is our primary concern, ment and the bottom line. We have made great strides we have a goal of zero product recalls. All parts of the in previous years and despite improving energy effi- LEGO Group are focused on this goal, and we are ciency by a further 2.4%, we did not meet our ambitious proud to have reached it again in 2011. target of 5% in 2011. Maintaining improvements at the same rate has been difficult and is expected to remain We have an ambitious vision of reducing the amount so. As a consequence, we have reduced our target for of waste we produce and increasing the amount of 2012 to 2.5%.

6 Consumer complaint call rate

800 700 The consumer complaint 600 call rate is the number 500 of consumer complaints received relating to 400 products launched 300 in 2011 as a parts per 200 million (ppm) of the 100 number of products sold 0 in the launch year. Target Result Target Female directors+

promotions Sick leave

3.0 30 2.5 2.0 Sick leave is the number 23 1.5 of hours lost due to 1.0 the employees’ own illness calculated as a 0 0.5 percentage of the total Target Result Target 0.0 hours worked. 2011 2011 2012 Target Result Target We did not reach our target of ensuring that at least 30% of promotions to top Energy efficiency improvement management levels went to females.

4 We set a high target 3 for 2011. We calculate the energy efficiency 2 improvement as the rate between energy 1 consumption and raw 0 materials used. Target Result Target

We have been working for years towards our 2015 tar- factor in reaching our goals. We are working to ensure get to be among the top ten companies for employee diversity in many dimensions, but failed to meet our health and safety. In 2011 we achieved an all-time low target for the percentage of females promoted to di- injury rate of 2.1, but just missed our ambitious target rector levels and above. of 2.0.

Moreover, we have seen a considerable fall in the number of hours that employees are absent because of illness, well within our target.

Motivation and commitment among LEGO employees Read more at was again at a very high level in 2011, which is a key http://aboutus.LEGO.com/sustainability

7 Sustainability - the LEGO way

It is deeply embedded in the values of the LEGO When we defined the sustainability agenda in late Group to leave a positive impact on our surroundings. 2009, we found it important to also define a few, fo- We are in the business of play and our vision is to cussed overall targets primarily with the purpose of invent the future of play. Children are our role mod- setting the direction for the organisation. els. They reinvent the world and themselves in it over and over again, surprising themselves and others by what they can create and do. We want to leave them a future that will enable them to achieve their full hu- Our overall targets man potential.

Since our foundation, we have been working con- 0 product recalls sciously and deliberately with sustainability, signing the UN Global Compact in 2003 and striving to ad- Top 10 on employee health and safety dress its ten principles. In 2006 we issued our first sustainability report and have since tracked our pro- Support learning for 101 million children gress every year.

Our efforts in the area of sustainability follow on from Minimum 100% renewable energy the way we run our business – ‘The LEGO way’, where only the best is good enough. In 2009 we made four 0 waste main promises to our stakeholders. These set the direction for everything we do, also when it comes® to our sustainabilityThe efforts. LEGO Brand Framework By delivering on our promises we are well on our way You can read more about our targets at to achieving our vision of ‘Inventing the future of play’. http://aboutus.LEGO.com/sustainability

The four promises are defined as part of our LEGO® Brand Framework:

Mission Inspire and develop the builders of tomorrow Vision Inventing the future of play

Play Promise Partner Promise Joy of building. Pride of creation Mutual value creation Promises Planet Promise People Promise Positive impact Succeed together

Spirit Only the best is good enough

Values Imagination - Creativity - Fun Learning - Caring - Quality

A1_plast_posters.indd 1 12/03/10 13.33

8 Message from the CEO

The LEGO Group achieved a As with everything we do, our sustainability ambitions record-breaking profit for 2011. It are based on our company spirit: ‘Only the best is is essential for us to create good good enough’. Therefore, we will continue to set high financial results in order to secure ambitions in order to increase our positive impact. the health of the company. We can only do so by continuously working to develop our In 2011 we started a journey of creating an even more sustainability efforts, while striving towards our Planet adaptable LEGO Group, which will also makes us a Promise of leaving a positive impact. more sustainable business. This change continues into 2012 and will have great implications for most of Since we were established, it has been of the utmost our employees as well as many stakeholders. We did importance for our owners to create value for all this in order to work more effectively when address- stakeholders: first and foremost for our core target ing the five adaptive challenges facing us. These are: group, consumers who experience the unique, fun globalisation with a particular focus on Asia, digitali- and developing play experience when engaging with sation, marketing integration and core innovation. Our our products; employees who can put their skills and Planet Promise will remain in focus as we tackle these creativity into play in the workplace; customers and challenges. other partners with whom we jointly create mutual value; and the environment surrounding us whether it With this Progress Report, we hold ourselves account- is by reducing greenhouse gas emissions or working able to our stakeholders and report on how we have to find better solutions to how we design, produce delivered on the promises we have made. Business and distribute our products. acumen and prudence are prerequisites for long- term respect, recognition, and success in society. We We believe that the most important positive impact have a well-designed and well-executed corporate we as a company have is through our products. governance in place which should help to ensure LEGO® products offer children something special that, in addition to advancing on our own sustainabil- on top of being a great play material. They offer ity targets, we also live up to our commitment to the 10 systematic creativity. The steady evolutionary process principles of the UN Global Compact. We signed the of continuously supporting and developing children’s Compact in 2003 as the first company in the industry creativity is at the core of our innovation process, and continue to support this initiative. which we endeavour to continuously improve. We regard our core products as sustainable, based on In 2012, we celebrate the 80th anniversary of the LEGO their long durability, and a compatibility that goes Group. In the years to come, we will keep pursuing our back more than 50 years. vision of inventing the future of play and do so in a balanced way that supports long-term sustainability. The sustainability ambitions we have set out to reach Succeeding in that will be the foundation for our suc- therefore also centre on our core products and their cess in the coming 80 years. impact from purchase of raw materials, to design and production, to distribution and to the play experience they bring to children of all ages.

For most sustainability areas we have made good progress during the past year, for example in waste and employee satisfaction. However, we have set high ambitions, and not all targets have been reached. This is the case within gender diversity and injury Jørgen Vig Knudstorp rates. Thus, there is no time for complacency. President and CEO

9 Our sustainability issues

In 2011 we have changed our reporting structure from reporting through our value chain in 2010, to this year reporting on eight sustainability issues relevant to our business. We believe this Environment, pages structure improves the transparency of our sustainability efforts. 18-21. In the LEGO The way we go about our daily business and our strategic Group we want to leave a positive impact on decisions impact all these issues. The eight sustainability issues the environment. Focus will help you navigate through this report. is on resources, as this has vital importance for future environmental demands.

Sustainable play, pages 12-17. We have strong opinions about Play. We believe that the LEGO Group should produce and market high quality products that last for generations and are safe online and offline. It is about continuing to develop a systematic approach to creativity and play to enhance learning and to help pass on the joy of play from generation to generation. Sustainable Environment play

Stakeholder dialogue, pages 32-35. We engage with our stakeholders with respect, listening and engaging in an open and honest dialogue on issues that matter to our stakeholders in order to meet or exceed their expectations. We have a responsibility that goes beyond Stakeholder Human rights the value chain of our products. dialogue

Human rights, pages 36-38. We actively take part in the promotion of internationally agreed human rights. We fully acknowledge that we have a responsibility to ensure respect for human rights in our operations. Human rights align well with many of our core values and we made a formal commitment to human rights by signing the UN Global Compact in 2003.

10 Climate, pages 22-25. Our most important stakeholders are children. They have a right to a healthy and rich environment both now and in the future. We acknowledge our contribution to man-made climate change, and are concerned about the consequences. We are therefore focused on saving energy at production sites and offices, and are working towards securing using renewable energy sources to, as a minimum, balance our electricity consumption at the latest in 2020 to leave a positive impact.

Employees, pages 26-31. We strive to improve the well-being, job satisfaction and development of our employees, while recruiting, welcoming and integrating new employees to our organisation. We recognise the rapid growth of our business has only been made possible by the skill, dedication Climate Employees and commitment of our people.

The LEGO Foundation, pages 41-44. In the LEGO Foundation we work to inspire and develop the builders of tomorrow. We do so by working with three different funding programs: Care for Children in Need, Care for Education, and Care for LEGO Local Communities. The LEGO Foundation holds 25% of the LEGO Group shares. Governance The LEGO Foundation

Governance, pages 39-40. We maintain professional management of our company, including a strong and competent board of directors in line with leading management practices, also with regard to good corporate governance.

11 Sustainable play

Throughout 2011 we worked on developing new corporate standards such as the new position on marketing to children. This chapter is about how we maintain consumer confidence in our products and how we work with systematic creativity and learning for children.

Selected sustainable play data

Product recalls Other selected relevant data

Target 2011 Result Consumer complaint call rate

We calculate product recalls as 2011 800 launched products recalled from 700 The consumer complaint the market due to product safety The LEGO Group has in 2011 600 call rate is the number issues. Calculated per stock stayed within our target of 0 of consumer complaints keeping unit. product recalls. 500 0 received relating to 400 products launched 300 in 2011 as a parts per 200 million (ppm) of the 100 number of products sold 0 in the launch year. Target Result Target 0

Net Promoter Score Index® Target 2012

The LEGO Group continues to have a focus on 0 product recalls in 2012. 0 120 index The index shows how likely consumers are to recommend For full data on sustainable play read data overview, page 45. a LEGO product or service to others.

We have strong opinions about play. Our origin and LEGO bricks never become redundant, as each one authenticity is expressed in the name: LEGO (a short- can be reused to build new ideas and to unfold chil- ened form of the Danish words Leg and godt, or play dren’s creativity. Bricks that are not passed on to fam- well). We believe the LEGO Group should produce ily or friends are often sold second-hand. We call this and market high-quality products that last for genera- Sustainable Play. The resilience and long-life of LEGO tions and are safe both online and offline. We con- products supports our Play Promise by extending play tinue to develop a systematic approach to creativity value over time. It also opposes a culture of ‘play and and play to enhance learning and to help pass on the throw away’, helping to support our Planet Promise. joy of play from generation to generation. We call this Sustainable Play. L earning through systematic creativity All LEGO® bricks are compatible across time and Our mission is to ‘Inspire and develop the Builders product line, giving each brick a very long lifetime. of Tomorrow’ by stimulating children’s systematic

12 creativity. The LEGO Learning Institute is part of the LEGO Group and supports this mission by conduc- ting research on how children can express creativity through systems of play and learning. The ambition is to bring knowledge and insight to new audiences, while at the same time generating helpful feedback to the people who design and build our play experiences. Over the years a profound understanding of how children learn and play has been accumulated.

In 2011 the LEGO Learning Institute researched the At this workshop, participants studied the Future of Learning with leading experts in play, learn- relationship between play and brain activity. ing and children’s cognitive development. This foun- dational study emphasises the importance of creative leadership in learning. In the course of the year, the In- Since its beginning more than 30 years ago, LEGO stitute held several working seminars with both LEGO Education has been responding to demands from employees and external academic partners on the Fu- pre-schools, schools and after-school facilities to ad- ture of Learning and its previous report, The Future of dress important areas of the curriculum. In 2011 LEGO Play. The results of the Future of Learning project will Education continued to extend its global reach with be publicly available in 2012, and the LEGO Group is several major projects, including introducing LEGO seeking to stimulate many initiatives around creative Education WeDoTM to science and technology teach- learning in 2012. ing in 20,000 primary schools across Peru.

case

Children’s private speech and play In 2011, the Billund-based LEGO Learning Institute intensified its academic collaboration with the University of Cambridge and Dr David Whitebread. In a project on Private Speech and Play, supported by the LEGO Foundation, a new study has initiated a series of experiments to evaluate how open-ended play stimulates children’s ‘private speech’.

This research describes the relationship between what children are doing with their hands through play, and what they are thinking about when playing. This indication of ‘children speaking out loud’ when playing by themselves, signifies a the start of a process of self-regulation, which is important for cognitive development, school readiness and the general ability of children to manage their emotions and social behaviour, explains Bo Stjerne Thomsen, Senior Research Manager LEGO Learning Institute.

Bo Stjerne Thomsen, Senior Research Manager, LEGO Learning Institute

13 Focus Build The Change: Building our Green City of the Future

More than 800 school children came together in Mel- in 2009 and introduced building with bricks as a tool bourne in Australia in November 2011 to build the to communicate and express ideas. Participants – green city of tomorrow out of LEGO® bricks. The mainly children – build the changes they want to see children focused on green parks, alternative power in their own communities. stations, pleasant places to sit and enjoy life, and Build The Change events are organised between finally green and sustainable houses. the LEGO Group and selected partners and focus on many different topics. Through the programme the The children were building their ideas at the Build The LEGO Group hopes to foster systematic creativity and Change event, ‘Green City of the Future’. The event co- imagination among children. Besides creating aware- incided with the official Danish Business delegation’s ness about LEGO Education and its learning products, visit to Australia named ‘State of Green, Join the Future. Think Den- mark’ headed by Their Royal High- nesses, the Danish Crown Prince Frederik and Crown Princess Mary. The Royal couple came to see the work that the children had done and showed great interest in the ideas behind the creations. LEGO Education, the Danish Art Agency and ARTPLAY had arranged the Build The Change event in Melbourne in partnership. The event was designed to give the general public a chance to build their ideas and dreams for a greener city in the future. As many HRH Princess Mary took an interest in LEGO® MINDSTORMS®. Photo: Robert Cianflone/AP/Polfoto. as 2,400 people participated. – These children are the next generation to take over and it is important to stimu- the event in Melbourne also provided the children late their ability to think out of the box in order to find with the opportunity to reflect on how to build a green innovative and creative solutions to the challenges future. they will meet in the future. From listening to the pre- In 2012 the plan is to establish a joint venture with sent voice of children we can improve the future. Now the city of Manchester in the United Kingdom to ini- we just need to ensure that their voices are heard, tiate a Build The Change event that will serve as a says Camilla Torpe, event manager and creator of the source of inspiration for an urban renewal plan in event. Manchester. Children and their families will be invited The Build The Change programme was launched to build their ideas for a better city.

14 Quality systems in place The LEGO Group imposes high standards on design, development and production of LEGO products. All LEGO play materials comply with the European and the US toy regulations. All play materials must as a minimum comply with all toy standards, national as well as international. Our ISO 9001 certified quality management system forms the basis for quality control and continuous monitoring. The system ensures quality through random sampling, including counting elements, building models and assessing moulding More than 800 school children took part quality. We want to ensure that external partners com- in LEGO Build The Change in Melbourne. ply with our guidelines not only with regard to quality and safety but also with regard to our strong opinions about children and play. targeted adjustments and improvements. The Con- sumer Complaint Call Rate has been reduced over Meeting our consumers’ needs and the past three years. The target for the Consumer exceeding their expectations Complaint Call Rate in 2011 was below or equal to 800 Our ambition is to create life-long play experiences. ppm and the result was 623 ppm. Our target for 2012 This is why it is crucial that our products are durable, is to be below or equal to 550. while providing interesting and fun play. We have a We continue to react on consumer feedback to im- strong focus on the needs of our consumers in de- prove the play experience. veloping our products and it is important for us to exceed our consumers’ expectations of our products Product safety and the LEGO brand. We maintain an open dialogue Product safety is a top priority and is relevant both with our consumers in order to get a sense of their for our physical products and our online and digital needs and expectations. products. It is crucial that our consumers trust in the We want to constantly improve our products and quality of all LEGO products and that they are safe we have a history of collaborating with consumers to for children. Product safety is an important element create new products. In 2011 we launched our ‘Closing of product development, quality management and the Loop’ programme as a way to get more feedback partnerships. However, we aim to do much more than from consumers. Adults buying our products in stores just meet regulations – we want to meet and exceed can volunteer to be contacted shortly after their pur- all consumer expectations of the quality and safety chase by a LEGO employee, who will ask them about of our products, with regard to design, play patterns their experience. Our main objective is to gather infor- and usability. As a global company we need to com- mation that can help us shape our products to meet ply with a variety of local and regional product safety the consumers’ expectations. legislation. Some of this is achieved by following internationally acknowledged safety standards and sup- C onsumer complaints porting the further development of such standards. We also measure consumer satisfaction through The LEGO Group is a member of the Toy Industries the Consumer Complaints Call Rate. Since 2005 we of Europe (TIE) and the US Toy Industry Association have collected, analysed and systematically catego- (TIA), and chairs the European committee for stand- rised consumer complaints to detect a pattern and ardization of toy safety. As a member of CEN and ISO, designate main areas for development. Thanks to a we are engaged in promoting safety in the toy sector substantial amount of data, we are now better able by helping to define safety standards for toys. to track which product lines score high and low in the In 2013, an updated version of the European Toy Net Promoter Score (read more page 43), and make Safety Directive will come into effect. The new regula-

15 Build The Change was launched in 2009 and introduced building with bricks as a tool to allow children to communicate and express ideas about the changes they want to see in their own communities.

tions have more stringent demands for materials. We to make sure that when an advertised product is have spent 2011 screening our material portfolio and purchased, it will meet or exceed the expectations verifying compliance of each raw material to meet generated by advertising. By doing so we also believe these demands by 2013. that we can prevent disappointments and uphold the Product recalls are a strong indicator of quality and loyalty of LEGO builders. safety and we have only had two product recalls over the The LEGO Group is a member of the Responsible past eight years. In 2011 we met our target of zero prod- Advertising and Children Programme, and we are uct recalls, and this will be our target for 2012 as well. committed to acting in accordance with legislation In 2011, we formalised the LEGO Partnership Traffic as well as self-regulation, such as the International Light into a corporate standard in order to signal Chamber of Commerce’s (ICC) code of advertising internally that the LEGO Partnership Traffic Light is and marketing communication practice. Self-regula- global and must be adhered to by all LEGO employees. tion within advertising is a key component of ensur- For many years, the LEGO Partnership Traffic Light has ing that marketing communications are carried out been used to ensure that the LEGO Group manages responsibly. Self-regulation exists in the US with the its business outside its core categories in a controlled Children’s Advertising Review Unit (CARU), in most and structured way. European countries and many jurisdictions around The categories within the LEGO Partnership the world, and sets up regulation that goes over and Traffic Light cover many different business areas. above legal requirements. Since 2002 we have sup- Internal stakeholders from Global Quality, Corporate ported the organisation Media Smart, which develops Affairs, Corporate Communications, Legal, and Brand Development highlight concerns within their area of responsibility continuously in order to ensure that we get a 360 degree perspective on external partner opportunities.

Marketing to children Marketing and advertising allow us to show children the play experiences they can expect from a LEGO product. However, when communicating with children,

we are sensitive to the fact that children perceive We ensure that our products meet or exceed marketing messages differently from adults. We want the expectations generated by advertising.

16 and donates teaching resources about the interpreta- time playing online. They see it as a natural exten- tion of commercial messages. Media Smart in the UK sion of the physical world and boundaries between has also developed material about online marketing the two are blurring. As a commercial company we and the need to protect your data. In 2011, a lesson on need to make our products available for children in body image was developed by Media Smart to teach their digital playroom and be present in the social young people about the influence of media and ad- media, but it is a challenge to combine this with our vertising on body image. high standards on child safety. Because we adhere to In 2011 we introduced a corporate standard COPPA rules, we do not engage directly with children and principles for marketing to children in order to under the age of 13 on third-party social media plat- strengthen the internal awareness of our values and forms because we have been unable to fully moder- principles when it comes to marketing to children. ate and protect children in this sphere. We have always worked actively on ensuring that our marketing practices are responsible and live up to our stakeholder’s expectations. However, with an Read more about sustainable play at increasingly digital and global world we found that http://aboutus.LEGO.com/sustainability it was worthwhile to ensure that our principles are clearly stated. And our new standard is a reminder to all of our employees of the rules we all need to follow in everyday marketing practices. The guidelines are related to three main issues: in- experience and credulity; avoidance of harm; and social values. Across all channels, our marketing efforts must not exploit the natural credulity and inexperi- Weapons and violence ence of children by e.g. failing to disclose information Boys’ interest in weapons about the need for additional purchases. Additionally, between the ages of four children and youngsters must not be portrayed in un- and nine is considered by aca- safe situations or encouraged to engage in hazard- demics to be a phase in their de- ous activities. Finally, our marketing efforts must not velopment. Learning about how suggest that our products will give children a physi- to handle conflicts, aggression and weapons cal, psychological or social advantage over other chil- is often part of a LEGO play experience, but dren. only as a means to achieve the goal, whether it is rescuing citizens, finding treasure or sa- Online safety ving the universe. We have a focus on online protection when we develop our digital platforms. We support and comply with We have strict rules for the use of weapons the Federal Trade Commission’s Child Online Privacy and violence in our products. The LEGO Protection Act (COPPA) as well as articles of the 1989 play experience must never be related to United Nation’s Children’s Rights Convention, stating real world modern warfare, killing, torture or that children have the right to participate in play and cruelty to animals. In 2011 we expanded the the right to protection. LEGO brand guidelines with regard to use, Before 2010, our main focus was on securing child- expression and form of violence and wea- ren’s safety in the digital world by constructing and pons. The standard consists of guidelines keeping a safe environment on the digital platforms. already known to our employees, but now But children interact more and more in the digital these guidelines serve as an explicit basis for world, which represents an important part of their product development and communication. public sphere. This is why we expanded the focus on digital safety in 2011. Children spend more and more

17 Environment

In 2011 our environmental work included increasing our efforts in recycling waste at our factories, reducing the size of our packaging and preparing wood-based packaging and print to use solely FSC materials.

Selected environmental data

Recycled waste Other selected relevant data

Target 2011 Result Raw materials Our recycled waste percentage shows 2011 We calculate raw the recycled quantities of waste disposed materials as plastic compared to total quantities of waste We managed to recycle more granulate used in disposed. waste i 2011 than targeted for. * manufacturing at LEGO sites. Our use of raw materials has increased 85% from 42* in 2010. 49* 1,000 tonnes 88% Water consumption

Target 2012 * We have set our target for 2012 according to our result in 2011. 88% 225 * 1,000 m3

We calculate our water consumption as the quantity of For full data on the environment read data overview, page 45. water supplied to the LEGO Group.

In the LEGO Group we want to leave a positive im- products, to the production process, packaging and pact on the environment. Our focus is on resources distribution and finally to end of life. With our Planet as this has vital importance for future environmental Promise in mind, we work at reducing these impacts demands. We work to ensure that our business is pre- while focusing our environmental initiatives in order to pared to deliver on these requirements. Our ultimate ensure that we leave a positive impact overall. long-term goal is zero waste. For decades we have been focused on the durability, Our production long life and compatibility of our products, which gives All our production facilities are certified according to them a unique starting point. However, we still seek to the environmental standard, ISO 14001. Each produc- create more environmentally-friendly products and to tion plant in the LEGO Group adheres to our environ- reduce the waste we generate. mental policies in order to reduce our impact on the We do have an inevitable impact on the environ- environment. In 2012 we are gearing up to ensure that ment: from purchase of raw materials, to design of our offices outside production facilities also adhere

18 to all environmental policies. To make sure that we Zero waste reach our ambitious targets by 2015, we are planning Zero waste means that it should be possible for 100% to initiate two global projects on waste and employee of waste from the LEGO Group to be recycled and health and safety in 2012. The projects will build up our used in other products. We see this as a long-term capacity and capability with regard to waste sorting ambition that may not be achievable in practice, but as well as on continuously safe- remains our ultimate goal. We have guarding the health and safety of improved the percentage of recy- our employees. Waste cled waste in 2011 to 88% from 87% in However, we still need to im- 2010 at our productions sites. In 2011 prove to reach our ambition of the total amount of waste was 11,055 zero waste. One of the initiatives tonnes, compared with 9,644 tonnes to meet this target in production 11,055 of waste in 2010. The increase in total is the formation of Green Teams tonnes waste is not just a result of the growth at several local LEGO sites in 2011. in production, but also an increase in The Green Team members waste from building activities at all are responsible for encouraging We calculate waste as the sites. recorded quantities of and implementing new ideas on waste disposed As the design of a LEGO prod- how to reduce waste and energy from the LEGO uct and its packaging has high Group. This consumption. The idea is that only includes impact on the waste generated the teams send clear messages data from LEGO downstream in the supply chain, about the environment and en- Group sites with we also strive to work towards production. courage small changes in be- our goal of zero waste during the de- haviour that will, in turn, evolve sign phase. We have started our jour- into fundamental changes in the ney in two main areas: by optimizing mindset of our people. In 2011 our elements and packaging. the work of the Green Teams has been a great success, especially at the plants in Hun- Design for Disassembly of LEGO elements gary and Mexico. In both locations Green Teams have Design for Disassembly is about designing a product involved many employees. so it can be separated into base elements of materials at its end-of-life. Each element can then be reused Our global material approval process as raw material for new products. When it comes to Having a comprehensive raw materials list for our sub-assemblies and the electronic elements of our products is extremely helpful when we take our prod- products, we also see an opportunity to encourage in- ucts through our global material approval process. novation by our suppliers to support cost reductions We have used this process to test materials for many and environmental optimisation at the same time. In years, but from 2012 we will also be looking at the en- 2011 we began working with Life Cycle Assessments vironmental toxicology impact as part of this process. (LCA) to evaluate the effects of an element’s design We review all materials and assess them in order to on the environment over its life. LCA can help us make make sure that they fulfil the high demands of being decisions on a more informed basis when we design included in LEGO® products. In 2011 we began work- our products. ing on further central procedures to strive for higher standards by measures such as internal off-gas test- Sustainable packaging ing used in the Health and Safety assessment, and We have made great advances to increase the use of initiating the use of Life Cycle Assessment as part of recycled materials and our primary packaging (LEGO the evaluation. This has contributed to an improve- boxes) already contains on average around 75% recy- ment of the global material approval process. cled materials.

19 Focus Smaller boxes meet consumer needs and save CO² and waste

The Green Box project started as a project to reduce As the boxes are smaller, more can be filled into the size of LEGO® boxes to meet demands from trucks distributing LEGO® products, which in turn retailers and consumers who wanted less pack- means fewer trucks on the roads. aging material. With it comes the potential to save – We have 40,000 product movements every day over 1,000 tonnes of carbon emissions from pack- globally, and with the smaller boxes we can move aging and over 2,500 tonnes of cardboard waste more with fewer trucks, says Carsten Rasmussen. once it has been fully implemented in 2013. In order to improve packaging even more, Carsten Rasmussen and his team are currently testing the Throughout 2011, the LEGO Group has been working plastic bags containing bricks inside the box, known to develop and test the Green Box project in order as pre-packs. The tests are looking for ways to reduce to be able to fully imple- the amount of air in the pre- ment it globally in 2013. pack bags, while keeping The project focuses on up the high requirements reducing the size of box- for product safety. es, but as the project developed it became clear L ess packaging that there were obvious material = less waste environmental benefits By reducing the amount too. of packaging material, the Preliminary trials in- amount of post-consumer dicate that this project waste will also be reduced. could help save around – We are extremely hap- 1,000 tonnes on carbon py with these positive ef- emissions from packag- fects on our environmental ing material and over impact. Combined with the LEGO employees Carina Lysgaard and Franz Kock from the 2,500 tonnes post-con- Green Box project show the difference between old and new fact that we will now also sumer waste. LEGO boxes. start using FSC-certified – We can see that by material for all wood-based taking box sizes down, we save significantly on vol- packaging and print, we see this project as a great ume. This has a positive impact on how much paper leap towards creating a positive impact for the future, we have to buy for packing material, on how many says Jes Faltum, Director, Sustainability Development, boxes we can stack on pallets and finally, on how Corporate Affairs. many products we can pack in trucks when we distribute, says Carsten Rasmussen, Senior Vice Presi- dent and General Manager, EU Production. Calculations of the total carbon emissions regarding the total lifecycle of the packaging materials indi- cate that the carbon footprint of the packaging mate- Read more about the environment at rials will be reduced. http://aboutus.LEGO.com/sustainability

20 In 2011 we joined FSC Denmark, the Danish office of the Forest Stewardship Council, as part of our plan towards achieving 100% FSC-certified sources for main wood-based packaging and print materials. We chose to join FSC because of the high level of trust it has internationally. In 2011 the LEGO Group was criticized by Green- peace for using mixed tropical hardwood from a supplier in Indonesia. According to Greenpeace, mixed tropical hardwoods were found in one LEGO product, a book produced under licence by one of our licen- sing partners. We entered into a dialogue with Greenpeace and further developed our three-step plan: first to reduce Changing employee behaviour is an the impact of our packaging on the world’s forests important part of reducing waste. already put forward in our Progress Report 2010; second, to maximize the use of recycled packaging material; and third, to also ensure that all fibre, including Read more about the environment at any virgin fibre used, comes from FSC sources. http://aboutus.LEGO.com/sustainability

point of view

Greenpeace One of the world’s most bio-diverse habitats, the Indonesian tropical rain forest, is being pulped and turned into paper packaging. Driving this destruction is Asian Pulp and Paper (APP). Greenpeace’s investigation found tropical APP fibre in packaging from the LEGO Group.

The LEGO Group reacted quickly. It had some clear advantages compared to the other companies. Firstly, it was already thinking in terms of reducing its paper use, to increase share of recycled and to only use certified virgin fibre.

Secondly, because it makes most of its products in its own factories, it could quickly confirm that the use of rainforest fibre had been confined to license products. This direct ownership allowed the company to enact its new paper policy, while other toy companies took months investigating the required change.

Dan Belusa, Greenpeace

21 Climate

Our climate work in 2011 has concentrated on reducing our total energy consumption, with focus on energy savings through new initiatives, such as engaging employees and dedicated work towards securing renewable energy sources.

Selected climate data

Energy efficiency improvement Other selected relevant data

Target 2011 Result Total energy consumption at production sites We set a high target for 2011. We calculate 2011 the energy efficiency improvement as the rate between energy consumption and raw We did not meet our materials used. target in 2011. +5% 198 GWh This is our total energy consumption in the form of +2.4% electricity and heating supplied to the LEGO Group.

GHG emission

Target 2012

We have adjusted our target in 2012. 2.5% * 96 tonnes For full data on the climate, read data overview, page 45. * 1,000 tonnes CO²-equivalents.

Our most important stakeholders are children. They In a step towards that and creating transparency have a right to a healthy and rich environment both for our own and other corporations’ activities on the now and in the future. We acknowledge our contri- climate agenda we joined WindMade™ as a foun- bution to man-made climate change, and are con- ding partner in 2011 with the ambition of establishing cerned about the consequences. We are therefore a standard for how companies can demonstrate their focused on saving energy at production sites and renewable energy commitment and performance. offices and are working towards securing renewable We succeeded in this ambition during 2011 and the energy sources to, as a minimum, balance our elec- first WindMade standard is now a reality. The process tricity consumption at the latest in 2020 to leave a has brought important progress for the LEGO Group positive impact. We have a target of using 100% re- through informative dialogue and knowledge sharing newable energy in 2020. with NGOs and professionals globally. This will help

22 us greatly in our work towards our target to use 100% renewable energy. In 2012 the LEGO Group will play Our energy usage a less active role in WindMade as it has now com- by main areas mercialised and delivered on our ambition. We will still support the initiative as a founding partner. 72% 12% Energy efficiency and consumption 5% Between 2007 and 2010 we have made great strides, improving energy efficiency significantly. Maintaining improvements at the same high yearly rate has been 11% Moulding difficult and is expected to remain so. Our target for Packaging energy efficiency, set in 2007, has been to improve Storage by 5% yearly towards 2015. Despite improving by a Administration further 2.4% in 2011, we have not met our ambitious target of 5%. This figure shows in which parts of our business we used The main reason behind this is that we increased the most energy in 2011. our total use of energy by 10% in 2011, keeping pace

Better cooling for our employees has adversely impacted our energy efficiency in 2011.

23 The LEGO Group joined WindMade™ as a founding partner in 2011. Photo: DONG Energy

with the growth of our business. The expansion of our tocol. The accuracy of the calculations enables the Mexico plant in particular has significantly contributed LEGO Group to identify where in our value chain we to this increase through the implementation of com- need to focus in order to reduce our greenhouse gas fort cooling as part of our People Promise. Moreover, emissions. approximately half of our planned energy efficiency The GHG account indicates that a large contribu- projects were stopped, or delayed unexpectedly. tion stems from upstream activities related to the raw We will make continuous investments in improv- materials we use, amounting to approximately 60% ing energy efficiency, but the gains will be harder to of the GHG account. Emissions from processing of achieve. For 2012 we have adjusted our target to 2.5%, the raw material, bulk transport, distribution and other focusing on improvement projects within energy ef- core activities amount to approximately 30% of the ficiency. The search for new and big innovations to GHG account. Based on these findings we have iden- once again significantly increase our energy efficiency will continue in parallel.

Greenhouse Gas Account GHG emission In 2011 we calculated the Greenhouse Gas (GHG) (1000 tonnes CO²-equivalents) Account for the LEGO Group for the year 2010. The goal of the study was to estimate the GHG account throughout the value chain. It covers the relevant di- 100 rect and indirect GHG emissions from activities within Our CO²-emissions have grown due to 80 the organizational boundaries, from the reporting general growth of company, and upstream and downstream. 60 our business. We The calculations are based on the guidelines out- have seen a growth 40 in emissions in 2011 lined in the GHG Protocol Corporate Accounting and because of increased 20 Reporting standard published by WBCSD/WRI. To the volumes produced at our Mexican plant. extent possible, it includes Scope 1, 2 and 3 emis- 0 sions and it comprises the accounting and reporting of the greenhouse gases covered by the Kyoto Pro-

24 tified the following focus areas in the attempt to re- ed trucks when products are brought to and from our duce the GHG burden account for the LEGO Group. European Distribution Centre in the Czech Republic. We have also worked to secure transportation ca- Improving transport pacity and improve the options for environmentally- In 2010 we set up a benchmark model to compare sound rail transportation. This is why we have used our logistics contractors directly. This system creates the system of intermodal transport. a competitive environment where smart-thinking for better transport solutions is easier to evaluate and implement. During 2010 we worked closely with one of our transport providers in Europe to test a new sys- Read more about climate at tem which reduces the distance travelled by unload- http://aboutus.LEGO.com/sustainability

case

Mexico’s Green Team reduces energy At the LEGO factory in Mexico, a new Green Team manned by engaged employees saw the light of day in 2011. The Mexican Green Team’s mission is to find ways to reduce energy consumption. During 2011 the team began by installing internal electricity meters. The meters provide the team with a detailed overview of where the factory needs to focus to reduce energy consumption. The collection of data from 2011 will be used for a new plan for energy reduction in 2012.

Mexican employees, unused to the idea of reducing energy, weren’t sure at first why they needed to focus on energy consumption and many of them were not completely sure what to do. To engage his colleagues better the leader of the Green Team, Jesus Ramirez, arranged weekly meetings, each with a new topic, as well as training sessions.

– The weekly meetings, information, and training have truly made a positive impact on my colleagues, because they now know ex- actly what targets we are reaching for and most importantly why! Now we are all committed to reducing energy and we get positive feedback from everyone, explains Jesus Ramirez.

Jesus Ramirez, Leader of the Green-Team, Mexico

25 Employees

In 2011 we continued our work towards our 2015 target to be among the top ten companies in the world for employee safety. We also worked to improve the well-being, job satisfaction and development of existing employees, focussing on empowerment and collaboration and we worked to integrate new employees.

Selected employee data

Injury rate Other selected relevant data

Target 2011 Result Sick leave

We calculate the injury 2011 3.0 rate as the number of occupational injuries We are at an all-time low for 2.5 resulting in at least one injury rate, but did not reach 2.0 day’s absence following our target for 2011. Sick leave is the number the day of the injury. 1.5 2.0 of hours lost due to 1.0 the employees’ own illness calculated as a 0.5 percentage of total hours 0.0 worked. Target Result Target 2.1

Motivation and satisfaction

Target 2012 At the end of the reporting year we survey our We have set an ambitious 2012 employees regarding target. among other things their 1.8 motivation and satisfaction. The number shows how many index points we are above our inter- For full data on employees read data overview, page 45. +14 national benchmark.

The employees in the LEGO Group are the building Safety at the LEGO Group blocks of our success. We recognise the rapid growth At the LEGO Group safety comes first; not only with of our business has only been made possible by the regard to the products, but also with regard to our skill, dedication and commitment of our people. In the employees. We have set a target to be among the next few years we expect to welcome around 5,000 top 10 companies in 2015 for employee safety. We new colleagues and it is very important that each and are OHSAS 18001 (Occupational Health and Safety every one of our new colleagues understands and Management System) certified at all LEGO sites with lives our unique LEGO culture. Two main issues are in more than 100 employees. This certification ensures focus regarding our employees: We want to improve our commitment to continuous implementation and the motivation and skills of our employees. And we improvement of the way we manage our health and continously improve safety. This is all part of realising safety systems. We measure our employees’ safety our People Promise to succeed together.

26 ty observations each month. And employees in selected areas have to undergo our training programme ‘Safety Plus’. The programme combines theory-based knowledge about safety and practical exercises in groups. Focus is on raising awareness about preven- tion of accidents. We have rolled out the tool called ‘15 seconds’ in selected areas of the organization in order to train employees to reflect upon safety and inappropriate habits for 15 seconds every day.

Safety training in production has helped We believe that our collective actions will lead to a reduce the number of accidents. change in behaviour, resulting in reductions in injuries and absence due to injuries in 2012. The target for 2012 is to reach less than 1.8 injuries per million work- by looking at several indicators, including the number ing hours, which is even lower than the 2011 target, of injuries with absence and the absence rate due to and to reach an absence rate due to injury of less injuries. While the number of injuries with absence in than or equal to 0.2 per 1,000 working hours. This tar- 2011 fell to 36 from 44, the absence rate due to inju- get is stricter for us than the target we set for 2011. ries rose to 0.35 per 1,000 working hours in 2011 from Though we did not make the target this year, our con- 0.29 in 2010. This failed to meet our target of 0.26 for tinuing focus on problem areas makes us believe it is the year. The increase is a reflection of an increase in possible to do so in 2012. the severity of the injuries, requiring our employees to take more time off work. EHS non-conformities at main LEGO sites In 2011 the injury rate fell to 2.1 injuries per million In 2011, we received 10 major Environment, Health and working hours, from 3.0 injuries per million working Safety non-conformities from our external certifica- hours in 2010. However, this was slightly above our tion company. Six of these were related to environ- 2011 target of 2.0. ment, and four were related to health and safety. Nine We saw a greater number of injuries among our of these were in Billund and one in Kladno. In 2012 office workers, mainly in Denmark, but also at our we will have a special focus on Billund for improving brand retail stores. In the first half of 2011 alone there were no fewer than six reports of office accidents in Billund resulting in periods of absence, greater than the whole of 2010. To remedy this, in 2012 we have LEGO employees in the world planned further campaigns to highlight safety awareness in offices, but also in LEGO® Brand Retail stores. The Americas and Our offices in the UK, the US and Germany have not Oceania had one single accident in 2011 resulting in absence. However, in production we have seen some tre- 3,286 Asia mendous improvements as a result of an ongoing campaign to encourage our production workers to take ownership of safety improvements, to regard re- 219 sponsibility as a collective matter and to pay attention Europe to safety in everyday work life. This proactive safety approach has been introduced as the way to change 7,285 culture, attitude and behaviour. We have embedded a focus on proactive safety as part of our Performance Management Programme. Production employees are now obliged to report safe-

27 Focus Increased focus on diversity in 2012

A diverse body of employees is a key factor to the – We are highly concerned about diversity in two success of a global company such as the LEGO main areas. We keep a high focus on both cultural Group. From 2012 the focus on diversity at all levels and gender diversity, says Jørgen Vig Knudstorp and in the company – and with special attention on di- continues: rector level and above – will be enforced. – I believe that we are on the right track towards improvement. The fact that no women were appointed It is about people from Asia, Europe and the US. It is to the new management reflects that in the past we about women and men. It is about professional back- have not had a strong enough focus on developing grounds and different personalities. our female employees’ talents. We Such diversity is important for the have this now. We believe that in LEGO Group to match the world Female three years’ time we will be able to in which business is made and to directors+ harvest the benefits of our new in- support better decision making. ternal recruitment focus on women Jørgen Vig Knudstorp, the CEO promotions for director level and above. of the LEGO Group explains: – In the future we need to ad- A ttracting diversity can be a dress these diversity challenges 30 challenge when hiring and promoting 23 One side of the coin is to de- leaders. From now on all lead- velop female talent. Another side ers have to explain why they consists of attracting women as 0 cannot find at least one can- Target Result Target part of a diverse body of talents didate amongst the last three 2011 2011 2012 in general. Troels Wendel- with a ‘diversity profile’. By empha- bo, Director, HR Insights sising the importance of following & Planning, Executive HR the policy and by speaking out loud explains: about cultural biases we believe that we will be able – We need to challenge to recruit an even more diverse body of leaders, says ourselves when recruiting Jørgen Vig Knudstorp. new directors. We need to attract more diverse candidates externally. We know that diversity is a param- Re-organising for the future eter at all management levels in order to build the In 2011 the LEGO Group began a large re-organisa- necessary pipeline of talents for the organisation. tion. The re-organisation has focused on becoming The average staff turnover in the LEGO Group is more adaptable and more effective. One of the ma- low, which means that it takes time to change the di- jor effects of the re-organisation process has been versity ratio. Also the hidden cultural barriers, such the expansion of Group management from six to 22 as the human propensity to select people reflecting members. themselves, need to be uncovered in order to insti- One of the unforeseen consequences of this move gate change. has been the fact that the LEGO Group now has a Group management with no women.

28 these matters. The environmental non-conformities showed that additional resources should be dedicated to address the findings, and an environmental manager was hired to secure future compliance.

Occupational health of the LEGO employees In 2011 we also looked more in detail at the occupational health of our employees. Occupational health involves both the health and safety of our employees. We take some of the responsibility for the health of our employees upon us at Group level, in order to reduce sick leave and improve the well-being of our employees. We regard this responsibility as a chance to remind our employees about the necessity of a Motivation and job satisfaction are healthy lifestyle and we provide them with concrete high among LEGO employees. opportunities to act. Our employees are encouraged to suggest improvements or express ideas on how to improve our working environment. according to our employees. Across the world, our In 2011, we encouraged our employees to engage employees said that having an extraordinary job with in various locally arranged activities such as becom- exciting tasks and great colleagues, while working for ing a member of the local LEGO cycle team, running a company with a strong culture and values is highly during the lunch hour or joining the local LEGO gym motivating and satisfying. to work out. Other local initiatives were healthy food During the last three years, we have had a stra- alternatives in the canteens, no sweets in the work- tegic focus within our people and culture agenda to place, quit-smoking courses and weight-loss pro- embed and embrace our culture as formulated in our grammes. Our employees are encouraged to suggest People Promise. We use our employees' own subjec- improvements or express ideas on how to improve tive assessment of our company culture from the our working environment. Pulse results to measure our People Promise. In the third year of this initiative, we have seen this score Motivation and satisfaction improve from 51% to 66%, meaning that two thirds of Highly motivated and satisfied employees are the all departments experience our culture even stronger building blocks of our succes today. In our annual today than in former years. This is below the rather Employee Pulse survey a high level of motivation and ambitious target set of 80%, but more than satisfac- satisfaction among our employees is evident. We tory. Most importantly, we do not find huge motivation- measure our performance against the general labour al discrepancies between either different job levels, markets in a point system, and we have a long-term business units, nationalities or length of service across target of being 10 points ahead of our benchmarks. the company. We can see from the Pulse that it is the same things that motivate people all over the organisation from Work-life balance Mexico to New Zealand and from production worker Our employees also report on how they experience to top-level management. the balance between their life at work and outside A total of 93% of employees took part in Employee work. Our target for 2011 was to achieve an employee Pulse in 2011, which shows high engagement. As was score on work-life balance of 0-5 points above the the case last year, the overall level of motivation and global benchmark. The results show that we have satisfaction rose to +14 in 2011 from +12 last year. achieved six points above. An increase in motivation, satisfaction and engage- Despite this high score, we are well aware of the ment is related to our values, culture and reputation, challenges in keeping a healthy balance. It is impos-

29 The mould workshop in Billund has been the focus in a proactive safety campaign in 2011.

sible to define a standard work-life balance as each of female new-hires and promotions at director level individual has different circumstances at work and at and above. We have seen general progress with re- home. One of the potential pitfalls of being a highly- gard to female recruitment in new director positions. motivated organisation is the risk of employees push- In 2010 we achieved 32% female recruitment for ing themselves and each other too hard, driven both director level and above, which indicates that re- by personal enthusiasm and by strong commitment cruitment in the LEGO Group is moving in the right to the many, often exciting and rewarding, tasks at direction to meet our high ambitions with regard to hand. Some employees might be so engulfed in their gender diversity at this level. This result formed the job at periods that they are at risk of being stressed basis for setting the target for 2011 as high as at least or burned out. To combat this we focus on a frequent 30%. While we succeeded in recruiting a good num- dialogue between employees and managers. We ber of highly competent female directors in 2011, we have also focused on expanding virtual workplaces achieved only 23%. The primary challenge for the and are constantly exploring alternatives to long dis- LEGO Group is to recruit women to these positions tance commutes and business trips abroad by work- externally. Only 14% of those recruited externally for ing together in smart and virtual ways. new positions were female while the percentage was 29% for internally recruited staff. Even though the re- Cultural and gender diversity sults show that reaching our target is a challenge, we The LEGO Group is an international company and we are not lowering our ambition. The target for 2012 is want our employees to reflect the variety of society to attain 30% or more women for positions at director in general with regards to culture, backgrounds and level and above. way of thinking. Though we do not set targets for our cultural diver- We have a strong focus on diversity in respect sity, in 2011, we hired a larger amount of employees of culture and gender in order to strengthen the or- with a cultural diverse background at manager levels ganisation and our relationships to our stakeholders. and above than ever before. In recent years we have focused on how to secure and improve our recruitment of women to positions at A ttracting and integrating new talent globally leadership level or above. We have measured our pro- The number of employees in the LEGO Group in- gress in two dimensions; namely the overall number of creased by 947 in 2011. The increase is attributable female directors in the LEGO Group and the number to the large increase in activities in connection with

30 the considerable sales growth. Our challenge is to will from the first working day be teamed up with a attract qualified applicants for vacancies, select the ‘Brick-Mate’ - a colleague who can help them with the right people for the jobs, and integrate them into the big and small issues in figuring out the organisation LEGO culture. as a newcomer. Attracting new employees includes marketing the These are some of the initiatives of the “on- LEGO Group as an attractive workplace – and one boarding” strategy designed to help new recruits get of the tools is to provide new, personalised content aboard and into their new jobs. Further initiatives in- in the jobs section of www.LEGO.com. On average, clude the launch of two other internal websites: one 60-70 vacancies are available at any given time. We for leaders whose job includes taking on new employ- also now appear on job-related social media such as ees, the other is a site new employees can visit after LinkedIn. Our aim is to position the LEGO Group as they start working for the company. The new strategy one of the world’s most progressive employers. The focuses on three phases in our recruitment of a new new job site is an important step on the way. It was employee: attracting candidates, selecting the right launched on December 1 2010 and has reached ap- people, and finally settling the successful candidates proximately 50,000 unique visits a month – especial- in their new jobs. It is built on the framework of our ly from the US, Germany and Denmark. One of the best practices of how we onboard new employees. benefits is that applications for jobs in Denmark from other countries are on the increase. When we hire a new employee, we immediately provide them access to a special website where they can learn more about the LEGO culture and history. Read more about employees at And as a new initiative in 2011, the new employees http://jobs.LEGO.com

case

Proactive safety as the means to an improved safety culture Throughout 2011 the LEGO Group has kept a strong focus on safety in the mould workshop in Billund. The aim has been to reduce the injury rate by improving the safety culture. Employees took part in a safety workshop identifying problems and solutions.

– Since the launch, all 91 employees have had to report one safety observation a month. The we select and award the best observation. I am sure that this initiative and our explicit focus on safety has improved our safety culture. Now it’s on everyone’s mind and it’s OK to care and interfere. I think this has contributed to the fact that our injury rate has been significantly reduced, says Arne Jensen, Manager of Mould and Maintenance.

Arne Jensen, Manager of Mould and Maintenance

31 Stakeholder dialogue

Throughout 2011 we have been working to further improve the regulations on toy safety. We have engaged in continuous dialogue with all of our stakeholders and through a number of surveys, conversations and discussions learned more about them and their expectations of us.

Being in a respectful dialogue with stakeholders and pate in toy-related lobbying activities in external as- our surrounding community is of foremost importance sociations with focus on critical standards, changes in for the LEGO Group. We are committed to being open legislation, or other initiatives that may influence and honest, and to reaching high transparency when the LEGO® brand. we communicate with our stakeholders, e.g. NGOs, Our primary focus is on regulatory developments consumers and fans, suppliers, and public authorities. within intellectual property rights, toy safety and mar- The LEGO Group gets great inspiration and input keting to children. We are interested in ensuring that from every stakeholder, whether through online com- the framework conditions for the toy industry are sen- munities, employees, partnerships or other forums. sible and workable. As an example we support strict Our products’ journey from distribution centres to the rules on toy safety to ensure the highest possible hands of a LEGO builder has to pass through several level of safety for children, but new rules must also of our stakeholders such as distributors, retailers and still be possible to implement. We believe that with buyers. The success of this journey is defined by the our long history of producing safe toys we have key way we co-operate closely with our partners and com- knowledge and competencies to contribute to the municate and advertise effectively and responsibly. process of developing new rules. We participate in international and regional asso- L obbying activities ciations such as the Toy Industries of Europe, TIE, the We work to ensure that our lobbying activities always Toy Industry Association, TIA, the European brand or- seek to benefit all stakeholders and are conducted ganisation, AIM, and the World Federation of Advertis- in a transparent and professional manner. We partici- ers, WFA. We also take active part in the development of new toy safety standards in the European Com- mittee for Standardisation, CEN and the International Or- LEGO stakeholders ganisation for Standardisation, ISO, and the American Standard for Testing and Materials, ASTM. The focus in 2011 has mainly been on explaining what the LEGO Group is doing in relation to chemi- Consumers Customers Employees cals and product safety and we have primarily com- municated with the European Commission, NGOs, and the American authorities. The reason for this is Foto fritlægges the continued focus on chemicals and product safety, Society Business and input from toy companies on the best approach Community, partners/ Shareholders Media, NGO’s, on managing chemicals is requested by a number of suppliers Authorities stakeholders. We have had a good dialogue with the authorities about the level of documentation that can be considered satisfactory in regards to the product

32 safety area. We find these discussions very fruitful as they inform us about the expectations from our stakeholders and give us an opportunity to explain our approach and to make informed decisions on how we can improve.

Dialogue with NGOs We have had a constant dialogue with national and international NGOs throughout the year. We value this dialogue as it helps us to improve employees’ rights, working conditions as well as our environmental performance. And it helps increase the understanding of We meet our customers in many these potentially complicated issues. situations, here at the Nuremburg Toy Fair.

T ax and other economic impacts Tax is a major aspect of business in the community. On able insight into our consumers’ interests. Without our the wider agenda, the economic impact of our busi- employees’ active engagement on our different social ness on society is based on the direct and indirect media platforms we will not succeed. To enable the employment and associated money flows, including social media strategy internally we have trained 125 tax paid. It is fundamental to us that our relationships employees as certified social media users. with the local communities in which we operate are The LEGO Group launched several different social based on trust, mutual respect, and a cooperative media sites in 2011. One of these is LEGO CUUSOO, spirit. We respect the laws and pay the taxes required which is a website which allows the LEGO Group to from us. The corporation tax bill for the LEGO Group source ideas from all around the world by asking peo- in 2011 was DKK 1,381 million. ple what they think we should be producing. Another site is ReBrick, a social bookmarking service, which Engaging with consumers was launched as a further step along the road of col- In 2011 the LEGO Group focused on aligning our di- laboration with LEGO fans and consumers. The focus rect contact with consumers through the LEGO Club, brand retail stores, our VIP loyalty scheme and LEGO Community Engagement and Events. We also began a process of getting even closer point of view to our consumers by studying how they perceive and use our products where they meet them – whether online, in stores or through consumer service. Walmart There are millions of articles, videos and photos The LEGO Group is the best in the industry about LEGO elements and models on the web and on at really helping us to manage our business social media networks, but the LEGO Group has only through all metrics including modular productiv- had a sporadic presence featuring individual prod- ity goals, sales goals, etc. The main challenge uct lines or initiatives. In 2011 we introduced a corpo- is to work further out with us; often The LEGO rate approach, employing a social media strategist, Group is too far along in the production process implementing guidelines for engaging on social me- to make changes to products, including exclu- dia networks and a social media ‘drivers licence’ for sives and new item shipments. employees. Being present in social media is part of our overall strategy to increase engagement with our consumers and improve the overall consumer experi- Andy Prince, Sr. Category Director for Boys, Games and Summer Seasonal, Walmart ence. It is also a great possibility for us to gain valu-

33 is on sharing and celebrating what consumers cre- The Net Promoter (NP) Program has proven to be ate with LEGO bricks. ReBrick will make it easier to very effective in collecting feedback from consum- navigate, enjoy and be inspired by the content cre- ers, using these insights to drive business decisions ated by LEGO fans and also help create connections and actions, and letting our consumers know that between people in the LEGO community. we heard them and took action. Net Promoter Score (NPS) is the key metric used to track consumer sat- C onsumer satisfaction isfaction and loyalty with our products and services. We measure consumer satisfaction through the NPS serves as an early warning indicator for the Net Promoter Program® which is a system of con- health of a business as it is closely linked to future tinuously listening to consumer feedback, acknow- sales. It is logical: if someone is satisfied with us, they ledging that we heard them, learning from it, taking will return, buy again, and tell their friends. action, and letting consumers and others within the It is even more important that we hear from un- company know what we did to improve their future happy consumers and react quickly so we can take experiences. About 500,000 consumers in 2011 told action, apologize and make it right. This is how we us how likely they were to recommend our products will earn their loyalty and repeat business. The Net or services to others and why or why not. Promoter Program raises employees’ awareness and We failed to meet the target of index 124 or above motivates them to consider the impact on consumer in 2011, with the final index ending at 120, at the same satisfaction and long term loyalty when making busi- level as 2010. ness decisions.

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LEGO® bricks make a difference in townships in South Africa For many years the LEGO Group has had great co-operation in South Africa with Hands on Technologies, both as a business partner and with regard to charity work through The LEGO Foun- dation. Hands on Technologies is a distributor for LEGO Education products. The problem was that many less privileged children from townships had never seen LEGO® bricks before and did not know how to use them.

– We have been able to constantly improve the learning with LEGO Charity boxes, e.g. by developing instruction material for teachers. The children are now able to build their future. We gave them 101 activities they can do with the LEGO bricks and general training, says Brent Hutchenson, MD Hands on Technologies and adds: – We see that when the children are playing with LEGO bricks they change their attitude and they have a desire to learn new things.

Brent Hutchenson, MD Hands on Technologies, South Africa

34 The LEGO Group will continue to raise the bar to create the best possible products and experiences for our consumers.

Knowing our customers better To make sure we listen and act on retail customer feedback, we have institutionalized an annual health check of our relationship with our main customers; the Customer Pulse Survey. The Pulse provides us with information on expectations for our future business, the effectiveness of our marketing efforts and the quality of our partnerships. It gives us valuable input on how we are performing on our Partner Promise.

In 2011, the Customer Pulse survey showed an in- In 2011 we worked with NASA on several crease in overall satisfaction, rising to 126 index points programmes to promote science and engineering. from 123 in 2010, with a base in 2005 figures. This beat the 2011 target of 124 index points. A target for 2012 had not been set as the Progress Report was posted to LEGOSpace.com in 2011, the others will fol- published. The Customer Pulse figures for Products, low during 2012. Marketing, Service, Partnership and Value were all at A second project in the joint outreach and edu- the same level as 2010 or higher (see page 45 for de- cational programme was the launch of three LEGO tails). In 2011 we also conducted a stakeholder survey Minifigures as passengers on the deep-space probe, in three markets: Denmark, the US and Germany, to Juno. The specially-constructed aluminium Minifig- gain more knowledge about their perceptions and ures of the Roman god Jupiter, his wife Juno and ‘fa- expectations of our sustainability work. We did this in ther of science’ Galileo Galilei will help raise aware- order to ensure that we improve our communication ness about Juno’s mission to improve understanding about sustainability to our stakeholders, as more and of our solar system’s beginnings by revealing the ori- more of our stakeholders demand specific informa- gin and evolution of Jupiter. Juno and the Minifgures’ tion from us in this area. The survey taught us, among journey will also be featured on LEGOSpace.com. other things, that we can improve and intensify the The LEGO Group also supported the first Google level of communication about sustainability issues to Online Science Fair to inspire scientific exploration our customers. We will be working on developing this among the next generation of scientists and engi- area in 2012. neers. The science fair celebrates scientific talent, creates scientific role models and unites students C o-operation in 2011 around the world in the quest for learning. The event During 2011, the LEGO Group has collaborated and was the largest online science fair in the world, at- started partnerships with some of the world’s largest tracting with more than 7,500 entries from more than companies and organisations working towards com- 90 countries. mon goals of promoting education, science, technol- The LEGO Group is also sponsoring this year’s fair, ogy and creativity to children. which is even more global in scope. Submissions will The LEGO Group’s three-year partnership with be accepted in 13 languages and there will be 90 re- NASA reached a milestone last year when the first gional finalists – 30 each from the Americas, EMEA LEGO models were delivered to the International and APAC. Space Center orbiting the earth. The models will be used in eight educational activities conducted by ISS crew members and available Read more about stakeholder dialogue at to teachers around the world. The first activities were http://aboutus.LEGO.com/sustainability

35 Human rights

In 2011 we began developing a strategy for human rights. The strategy has included the development of a draft policy on human rights, the start-up of a value chain impact assessment process and a review of our Code of Conduct.

Human rights play an increasingly important role in to meet our commitments. We expect the strategy to the global sustainability agenda. In recent years we be finalised and adopted in 2012. have experienced a growing expectation from society While all human rights are equally important, we re- in general and NGOs that we actively take part in the alise that some stakeholder groups are more affected promotion of internationally agreed human rights. than others by our activities and at risk of having their We fully acknowledge that we have a responsibility rights infringed upon. Similarly, we have a greater op- to ensure respect for human rights in our operations. portunity to support the promotion of some human Human rights align well with many of our core values rights than others. and we made a formal commitment to human rights Our strategy will for that reason focus on our em- by signing the UN Global Compact in 2003, commit- ployees, our consumers (the children), our suppliers ting us to ten universally accepted principles in the and people in local communities affected by our op- areas of human rights, labour rights, environment and erations. anti-corruption. Human rights impact assessment process Human rights strategy A key component of the strategy is a human rights The LEGO Group began the process of developing a impact assessment of our value chain, a process human rights strategy in 2011. The overall objective of which we began in 2011. The impact assessments will the strategy is to ensure that we have the right mea- first identify actual and potential areas where we risk sures in place when it comes to ensuring respect for negatively affecting human rights. Second, the as- human rights in our operations. The completed stra- sessment will identify leadership opportunities where tegy will outline the approach that the LEGO Group we can have a positive impact by promoting certain intends to take on human rights, and draw up those human rights. activities that we believe are essential for us in order During 2011 we have developed a tool box for con- ducting human rights impact assessment, including a preliminary human rights risk assessment of our value chain. The next step will be to assess to what extent Our Code of Conduct covers: our policies, guidelines and processes appropriately Child labour address the human rights risks we face. We expect to Compensation and working hours finalize the process in 2012. Discrimination The impact assessment process will lead to a list Coercion and harassment of potential risks and leadership opportunities, which Forced and compulsory labour, including will inform the finalization of the human rights stra- human trafficking tegy. An example of a potential risk could be when we Health and safety expand our business and production sites and buy Freedom of association new land. An example of a leadership opportunity The environment could be supporting the promotion of children’s right Anti-corruption to education.

36 Children’s rights Focus on children’s rights and businesses’ impact on Percentage of children’s rights has gained momentum in 2011. This is Major CoC non-conformities reflected in the Business and Children’s Rights Princi- found at supplier audits ples, an initiative started by the UN Global Compact solved in accordance with corrective action plans in Co-operation with UNICEF and Save the Children. The Principles will be launched in March 2012 and encompass those areas where a business potentially impacts children’s rights, negatively as well as posi- 100% 98% tively. In 2011 we participated in the consultation pro- Target 2011 Result 2011 cess of the Business and Children’s Rights Principles and we are following the initiative closely. The number from 2011 shows the percentage of major In 2011 we developed a corporate standard on mar- Code of Conduct non-conformities found at audited suppliers which have a deadline for the corrective action keting to children, which clarifies our position on this in 2011 and which have been solved before the agreed issue and ensures that when we market our products deadline. We did not reach the 2011 target. to children, we do it in a respectful and sensible way. We expect that we in 2012 will continue and even reinforce our focus on supporting children’s rights. We hope to do that in dialogue with our stakeholders, monitor compliance with the Code of Conduct via such as UNICEF and Save the Children. independent on-site audits and engage in proactive co-operation and capacity building of our suppliers to Our Code of Conduct promote sustainable supply chains. In 2011 we started We encourage our suppliers and business partners to conduct 5-10 un-announced audits on a trial basis. to respect their employees' human rights, and this This audit form has shown to be very successful and includes providing them with decent working condi- will be continued in 2012. tions. If there are conditions which do not meet our re- Since 1997 we have required that our suppliers quirements, the supplier must draw up an action and business partners sign our Code of Conduct. We plan in dialogue and with the assistance of the LEGO

All our suppliers and business partners sign our Code of Conduct.

37 Group, including a timetable for corrections. This will an increase of Code of Conduct audits. However, in be combined with a follow-up visit to check whether general we find fewer and fewer non-conformities at conditions have improved. Through a combination of our regular supplier base. We believe that the main action plans and follow-up visits, the LEGO Group is reason is the long-term relationship with our strate- helping to secure a programme of steady improve- gic suppliers base, which has been made possible ment in the working conditions of its suppliers and through a joint effort to raise their performance. The business partners. stakeholder analysis that we conducted in 2011 shows Our 2011 target for the resolution rate of the ma- among other things that ethical responsibility is im- jor non-conformities found at our suppliers was 100%. portant for our consumers. These findings led us to However, since we failed to close one major non- start work on refining our Code of Conduct manage- conformity we finalized the year with a resolution rate ment system in 2011. In addition to refining the Code of 98%. The reason for this was that we expected to of Conduct our focus has been on describing in more phase out a supplier where a non-conformity had detail the various processes that we and our suppli- been identified, but by the end of the year we realized ers need to follow. We believe that further detail in our that it was necessary to postpone the phasing-out Code of Conduct will benefit the employees of our until mid-February. The non-conformity will be closed suppliers. in February 2012. Due to increase in production, the A major focus for us in 2011 has been to comply LEGO Group has increased the supplier portfolio with the international standards on working hours in in 2011. Many of these suppliers are located in hu- China, which prescribe a 60 hours working week, in- man rights high-risk countries which has resulted in cluding overtime. We have seen difficulties with some of our suppliers in keeping within this standard. Due to the financial crisis, orders come in very late and it is difficult for suppliers to hire workers at short notice. point of view Furthermore, people are no longer willing to travel far for jobs. These facts increase pressure on the workers already there. Stop Toying Around! This challenge has been discussed with all strate- After more than a year of involvement with gic suppliers. We are in a close dialogue to help them the LEGO Group, the “Stop Toying Around!” improve this issue for their workers, which includes Campaign remains convinced of the on- looking at their working processes. going dialogue. Dialogue builds trust. But In 2012 the LEGO Group will continue to engage dialogue is not a means in itself. Dialogue in capacity building and training of suppliers to ad- needs to continue while serious, sustainable dress the challenges they may face in adhering to the improvements are achieved. Transparency standards of our Code of Conduct. Our aim is to en- and dialogue about positive changes are sure supplier ownership of good working conditions essential for supporters of the campaign, to in their workplaces. We will also train workers in order decide whether the LEGO Group deserves their to empower them to take a stronger role in asserting trust as a toy company with real and protecting their own rights. commitment to high ethical standards that include factory workers in China. Read more about human rights at http://aboutus.LEGO.com/sustainability

Claudia Bonk, International Coordinator

38 Governance

In 2011 we continued to focus on good governance in a family- owned business, working with a professional management and cross-functional bodies to ensure transparency and follow up on our policies, standards and directions.

As a family-owned business it is important that we board competencies to ensure a diverse and com- maintain professional management of our company, plementary composition of the board, regular board including a strong and competent board of directors self-assessments, competitive compensation to the in line with leading management practices, also with board of directors and clear and specific rules on regard to good corporate governance. mandate for each of the management bodies in the LEGO Group. Good governance in a family-owned company Furthermore, as a family-owned company, the Since the establishment of the LEGO Group in 1932, LEGO Group is more exposed to the risks involved the company has been privately owned by the Kirk in the handover from one generation to the next. To Kristiansen family. Our approach to good corporate mitigate this risk, a plan is prepared and implemented governance is focused on combining the strengths that results in high involvement of the next generation and benefits of being privately owned with good cor- of the family owners in company matters related to porate governance for listed companies. The LEGO the ownership. Group and its owners are interested in managing the company in line with globally leading management practices, also with regard to corporate governance. The benefits associated with being privately owned Business integrity with few owners include having owners close to the training business with strong industry knowledge and strong values, which can be inspiring and supporting for the development of the company and the employees. Other benefits are the ability for long-term focus, to 98% 100% 79% Result 2010 Target 2011 Result 2011 move fast and be agile with regards to changes in the business environment. Since 2009 we have had a target to secure the dedication to our business integrity among our leaders. We want to make B oard of Directors sure that all employees at director level and above receive training in business integrity every two years. The LEGO Group Board of Directors consists of seven members. Three of these are considered dependent In 2011 our business integrity programme was updated and on the company; two due to ownership, and one due a major group of employees at director level and above was due to complete a retraining in the last quarter. Due to to being in the management of the parent company. the focus on changing the organisation in the last quarter The Chairman and three other members are consi- (read more on page 40) several of these directors failed to dered to be independent. complete the planned re-training bringing the number of trained directors in the organisa- As a family-owned business it is important to main- tion down to 79%. It is however, planned to tain a professional management of the company, in- reschedule the training and the target for 2012 will therefore remain at 100%. cluding a strong and competent board of directors. One of the ways to support this is the practice the Besides the employees at director level board has had for many years of electing the Chair- and above, several employees working directly with customers and suppliers have man from among the independent board members. In completed the training programme. general the company works to ensure a professional board management, including definition of required

39 C orporate Management Legal Affairs. It has an explicit obligation to report to The LEGO Group Management Board and Corporate the Board of Directors on compliance matters. Management were changed during 2011. The latest major organisational change was in 2005, and since Creating value with four promises then the LEGO Group has experienced significant There is strong focus on ensuring the balance be- growth both in number of employees and in revenue. tween the value created for the owners, compared to The biggest change in the new organisation is a value creation for the remaining stakeholders of the new Corporate Management team, consisting of 22 company such as consumers, employees, custom- members instead of previously six. Furthermore, the ers and other partners. There is a sincere belief in the number of organisational layers has been reduced owner family that creating value for the company’s to ensure a flatter organisation, which ensures both stakeholders will also result in long-term value crea- a broader and a deeper perspective on the realities tion for the owners. The LEGO Brand Framework, in- of business, while making it simpler and cluding its four promises to various stake- ate Managemen rpor t (C faster to make decisions. Co M) holder groups, supports this thinking,

The structure of the LEGO Value Chain and therefore is an important part Supply Chain

innovation

Group has also changed. DistributionPlanning & of how we do business. Previously it had five busi- Engineering

& Quality Product Group 1 ness areas; Global Supply Product Policies Group 2 Procurement ent Bo em ard Europe Chain (GSC), Markets & ag (M The LEGO Group has a an B Americas M ) & Paciﬁc Products (M&P), Com- framework of 12 corpo- s Ma Asia & Emerging Americas on rk Manufacturing ti e Markets munity, Education & Di- a t rate policies, which all r in e g Innovation p

rect (CED), Corporate O & Consumer provide position and CEO EU Packing Marketing Center (CC) and Corpo- Shopper guidance on various Marketing & s rate Finance (CF). In the Busines Channel Dev. sustainability issues. For ling future, the LEGO Group Europe Moulding Enab example our Responsi- & Europe DUPLO Corporate will be organised in three Aﬀairs bility Policy ensures that

IT Finance areas: Executive HR Corporate our spirit and company Corporate values are never compro- Operations mised. Our Health and Safety Marketing Policy helps to ensure that all our Business Enabling activities are planned and executed in accordance with a healthy and safe The new LEGO Group Management Board con- working environment. sists of the President and CEO, Jørgen Vig Knudstorp, the CFO (the CEO is also temporarily acting CFO), Whistle Blower the COO, Bali Padda and the CMO, Mads Nipper. The About five years ago, the LEGO Group introduced Group Management Board together with 18 Senior its whistle-blower function. This gives employees the Vice Presidents forms the new Corporate Manage- opportunity to speak out about behaviour that they ment, which is the daily management body within the consider to be in violation of the guidelines that safe- LEGO Group. The Management Board refers to the guard the integrity and policies of the LEGO Group, Board of Directors. as well as any law or regulation. It is up to the employ- The cross-functional nature of the new corporate ee to decide whether he or she wants to be anony- management facilitates collaboration, quick deci- mous. All reports are sent directly to the head of the sion-making and clear authority delegation. LEGO Group’s Corporate Legal Affairs. The LEGO Group has a corporate compliance board which has members from Corporate Manage- Read more about governance at ment, including the CFO and the head of Corporate http://aboutus.LEGO.com/sustainability

40 The LEGO Foundation

In 2011, The LEGO Foundation reached out to 600,000 children – exceeding this year’s target of 470,000 children. The total value of donations from The LEGO Foundation in 2011 was DKK 46 million in product donations and DKK 29 million in financial support.

The LEGO Foundation is a non-profit organisation tomorrow”. This way, we provide the children of the that through its investment company owns 25% of the world with the tools to help them take responsibility LEGO Group. The LEGO Foundation also manages for their own lives – empowering them to be the archi- three different donation programmes. In The LEGO tects and constructors of the future society. Foundation, we believe that all children have the right The LEGO Foundation donates LEGO products all to play and learn. Under the headline “We Care and over the world, helping thousands of children, and or- Share” we make LEGO® products accessible and ap- ganising activities that offer children and adults good plicable for less privileged children around the world experiences and insight into the many creative learn- through our donation programmes such as Care for ing opportunities inherent in LEGO products. We en- Children in Need, Care for Education and Care for hance the education of the less privileged children LEGO Local Communities. via research programmes, systematic learning mate- The work of The LEGO Foundation is based on the rials and supplementary education of teachers. It is LEGO Brand Framework and like the LEGO Group, The LEGO Foundation target to reach out to one mil- our mission is to “Inspire and develop the builders of lion children in 2015.

Children in a slum area in Hyderabad, India, playing with LEGO® DUPLO® bricks received from private donors and the LEGO Foundation.

41 Related Foundations

In 2011 The LEGO Foundation also administered a ment of an SOS Children’s Village in Jimma, Ethio- number of related foundations. pia. In 2011, the total value of donations by the Edith & Godtfred Kirk Christiansen’s Foundation was DKK Ole Kirk’s Foundation supports non-profit and 15.9 million. charitable, social, cultural, church-related, humanitarian and educational purposes, mainly in Each year, LEGO employees in Denmark can Denmark. One of the original purposes of the nominate projects for the LEGO Employees’ Foundation was to develop the local community Anniversary Grant. The grant’s funds come from around the LEGO Group into an attractive living a collection among LEGO employees in Denmark environment for its employees. Ole Kirk’s Founda- in connection with the LEGO Group’s 50th anniver- tion accepts applications from the general public, sary. The purpose is to give employees an opportu- and caring for the weak and vulnerable in society nity to get involved in and submit projects that they is an important aspect in its work. The total value consider important and interesting. The projects of Ole Kirk’s Foundation donations in 2011 was DKK are typically small-scale projects where focus is 33.6 million. on nearness and involving people they know, who have committed themselves to trying to make a Edith & Godtfred Kirk Christiansens Foundation difference for others. was formed in 1978 with the purpose of supporting non-profit and charitable projects. The Foundation In 2011, a total of DKK 250,000 was donated to 16 supports a large number of cultural and church- very wide-ranging projects – all nominated by related projects in Denmark and internationally. LEGO employees. Recipients were causes such As regards cultural projects, the Foundation gives as a water pump run by solar cells for a school in priority to new ideas and initiatives that enhance Gambia and mattresses and beds for an orphan- the quality of life and human values, especially as age in India, a centre for AIDS victims in Thailand, regards children, young people and families. Exam- and a waste disposal system to improve health in a ples of the projects supported by the Foundation village in Guatemala. are the Center for ADHD and funding the establish-

Care for Children in Need UNHCR. As an example, in co-operation with Save the Running charity programmes often calls for in-depth Children we sent 1,800 boxes of LEGO Play boxes and knowledge of local practices. Therefore, the Care for LEGO DUPLO Play boxes to Dadaab in Kenya. Togeth- Children in Need programme continues our co-oper- er with UNCHR we sent 1,200 boxes to Kakuma, also ation with external organisations to help prioritize and in Kenya. The LEGO Foundation has also contributed successfully distribute LEGO Charity boxes. DKK 1 million to UNHCR emergency relief in the Horn During 2011, The LEGO Foundation reached out to of Africa, thought to be one of the worst humanitarian about 78 countries in five continents. crises in the world today. We signed a three-year collaboration agreement with UNHCR. The LEGO Foundation and UNHCR have Care for Education been working together to bring LEGO Play boxes and The Care for Education programme supports the DUPLO toys to child refugees and asylum seekers as development and improvement of underprivileged well as stateless children and returning and internally school systems by introducing and implementing the displaced children being assisted and protected by LEGO Learning System. By doing so, the communities

42 and school systems can provide an education that will motivate children to become self-directed, motivated learners, with the interest and capacity to become active citizens in their society. The programme enters into long-term partnerships with ministries of education, NGOs, foundations or private companies with the same philanthropic goals as the LEGO Foundation. Through collaboration with local governments, we train and support teachers in practicing a child-centered educational approach. Our Care for Education programme combines product donations in combination teacher training, support, for infrastructure and research. The Care for Education programme covers age groups from early childhood to high school. Care for Education combines product donation We support projects in various countries from with education. Our project in China is now up and Mexico to Ukraine and South Africa. One of several running in 25 Chinese provinces. projects in China is a collaboration with the Ministry of Education that focuses on creativity and technology in schools. Another China project has in 2011 reached out to 50-60,000 children in migrant and village kin- point of view dergartens in some of the poorest and most remote provinces of China. In Southern India, Tamil Nadu, we support 100 primary schools and high schools for UNHCR casteless children and we have trained all teachers in – Engagement, efficiency and expertise are the ten selected play schools. values that guide the co-operation between the United Nations refugee agency (UNHCR) and Care for LEGO Local Communities The LEGO Foundation and make our multi- Ever since Ole Kirk Kristiansen founded the LEGO faceted partnership unique. The partnership is Group in 1932, the family has been very much aware guided by our common vision that all children, of their responsibility towards the local communities everywhere, receive the quality education, deve- in which their employees live. The purpose of ‘Care lopment and well-being that is their right. Adding for LEGO Local Communities’ is to take concrete lo- another layer to the partnership, the financial cal action, showing compassion and human interest, support of The LEGO Foundation to UNHCR’s especially in the children in local communities. life-saving emergency relief in the Horn of Africa The activities in Care for LEGO Local Communi- was a very timely response to the massive and ties have received a warm welcome from employees, urgent needs there. We are because they are proud to be able to help make a very proud of working with difference in their own communities and experience The LEGO Foundation and the impact of their efforts at close hand. Decisions on appreciate the enormous which projects should receive help from LEGO em- work of former LEGO ployees each year are made by the employees them- employees and staff of selves through the works councils. the foundation.

Capital of Children Through three generations, the Kirk Kristiansen family Pia Prytz Phiri, UNHCR’s regional representative for the Baltic and Nordic countries has believed in the importance of a strong engage-

43 ment in the Billund community. The vision of making All of Billund Municipality can and will benefit from Billund an international as well as national gathering the Capital of Children. To give one good example, point for children, creativity, play and learning began The LEGO Foundation has decided to donate a LEGO to take shape in 2011. Billund Municipality (Denmark) Lab to all schools in Billund Municipality in connec- and The LEGO Foundation will each invest DKK 6 mil- tion with the project. A LEGO Lab is a completely new lion in the new private-public partnership over the specialist classroom which will give the students an coming three years. opportunity to work far more creatively with problem In 2012, the present Billund town hall building will solving, thereby bringing other competences into be refashioned into an open knowledge centre, the play in the learning process. Institute of Play & Innovation Science. The Institute of Play & Innovation Science will aim to attract research- ers and businesses and create a space for experi- mentation making it possible for children of all ages Read more about The LEGO Foundation at to experience the learning of the future. http://LEGOFonden.dk

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T he best reward is a child’s smile Each year The LEGO Foundation has supported more and more projects in the local community around the LEGO factory in Klad- no, Czech Republic. The goal is to make the LEGO presence felt in the region and the projects focus on supporting and improving children’s lives, creativity and development as well as improving their leisure time and making hospital stays more bearable and enjoyable.

Amongst this year’s projects are providing LEGO® bricks for hos- pitalized children; building better access to the grammar school in Kladno to allow disabled children in wheelchairs to attend classes; and furnishing the foster home in Ledce – including help to build a new PC room for the children with active participation of local LEGO employees.

– Helping people, especially children, is the most beautiful of all work. There is no better reward than a child’s smile. It is easy to just donate money, but there’s no motivation. Therefore, we not only support children’s homes financially, but we are also actively involved with the children in improving their environment. We are involved in painting their rooms and assembling their furniture, explains Jana Vlasáková, Works Council Chairman in Kladno.

Jana Vlasáková, Works Council Chairman, Kladno

44 The LEGO Group – Progress Report 2011 Performance data

Stake- Results Results Targets Results Targets holder Notea) Measures 2009 2010 2011 2011 2012 Consumer measures Number of product recalls 1 0 0 l 0 0 Consumer Consumer complaint call rate, ppm 930 779 <= 800 l 623 <= 550 Net Promoter Score Index®b) 126 120 >= 124 l 120 c) Employee profile measures 1 Number of employees 8,616 9,843 10,790 1 Female 45.3% 48.6% 47. 4% 1 Male 54.7% 51.3% 52.6% Average age 36.7 36.5 36.4 2 Rate of employee turnover 10.4% 9.3% 8.1% Director level and above promotions (externally recruited or 20% 32% >= 30% l 23% >= 30% Employee internally appointed) of female employees Health & safety measures Sick leave 2.9% 2.2% <= 2.6% l 2.1% <= 2.3% 3 Number of injuries with absence 61 44 36 4 Injury rate 4.8 3.0 <= 2.0 l 2.1 <= 1.8 Absence rate due to injuries 0.51 0.29 <= 0.26 l 0.35 <= 0.20 Employee commitment measures Employees Pulse - Work life range to global scorecard (LEGO EEI) +3 +4 +0 l +6 +0 - Motivation & Satisfaction range to global scorecard +11 +12 +10 l +14 +10 (LEGO EEI) - People Promise 51% >= 80% l 66% d) (departmental improvement rate) - Employee Net Promoter Score (LEGO EEI) +0 Business integrity measure Percentage of Director level and above at LEGO sites trained in 69% 98% 100% l 79% 100% business integrity biennially Key ESG measures at LEGO sites 5 Number of audits conducted at main LEGO sites 23 20 20 5 Number of major quality non-conformities found at main LEGO sites 0 5 0 l 1 e) 5 Number of major EHS non-conformities found at main LEGO sites 0 8 0 l 10 e) Partner 5 Number of major CoC non-conformities found at main LEGO sites 1 1 0 l 0 e) Percentage of major quality, EHS and CoC non-conformities found 100% at audits at main LEGO sites solved in accordance with corrective action plans Key ESG measures in supply chain 6 Total number of core and extended line suppliers 231 117 154 7 Number of quality audited suppliers 2 33 47 7 Number of CoC audited suppliers 48 33 61 Number of major quality non conformities found at suppliers 3 26 33 8 Number of major CoC non conformities found at suppliers 36 66 64 Percentage of major quality non-conformities found at supplier 100% 100% l 100% 100% audits solved in accordance with corrective action plans Percentage of major CoC non-conformities found at supplier audits 100% 100% l 98% 100% solved in accordance with corrective action plans Customer satisfaction measures Customer Pulse - Overall satisfaction 123 123 >= 124 l 126 127 - Products 106 105 105 - Marketing 107 107 107 - Service 117 121 127 - Partnership 111 109 109 - Value 113 110 112 Resource measures Raw material, plastic, 1,000 tonnesf) 36 42 49 Water consumption, 1,000 m3 116 220 225 Total energy consumption at production sites, GWhg) 155 174 198 Energy efficiency improvement -- +5% l +2.4% +2.5% Surrounding environment Waste, tonnes 7,970 9,644 11,055 Recyled waste in percentage of total registered waste 88% 87% >=85% l 88% >=88% a) Please refer to the “Notes to performance data” section. b) The NPS for 2010 was calculated using different measuring points than previous years. In order to compare results the 2010 results have been recalculated. c) The NPS definition for 2012 has changed using different measuring points and weighting by consumer impacts. 2011 is new baseline (index 100). The target for 2012 is 102. d) Measure is omitted due to changes in organisational set-up. New measure and target from 2012 is Employee Net Promoter Score (LEGO EEI). e) Targets are omitted and new measure is Percentage of major quality, EHS and CoC non-conformities found at audits at main LEGO sites solved in accordance with corrective action plans. f) 2009 and 2010 numbers have been updated due to changes in definition of material types. g) 2010 number has been slightly corrected. l Target met l Target not met 45 Notes to performance data

N ote 1, Total no. of employees N ote 6, Total no. of suppliers split on Code of Conduct risk, end of 2011 2011 2010 2009 Female 5,118 4,790 3,900 Direct Extended Total Male 5,672 5,053 4,716 China/Hong Kong 16 22 38 Total 10,790 9,843 8,616 Mexico 13 0 13 Total high risk countries 29 22 51 Asia 219 184 160 Americas and Oceania 3,286 2,751 2,245 Czech Republic 8 0 8 Europe 7, 285 6,908 6,211 Hungary 7 0 7 Total 10,790 9,843 8,616 Italy 3 0 3 Japan 0 0 0 Top management 50 47 46 Korea 2 0 2 Management 335 310 302 Poland 3 0 3 Other 10,405 9,486 8,268 Slovakia 2 0 2 Total 10,790 9,843 8,616 Romania 1 0 1 Taiwan 0 1 1 USA 7 0 7 Note 2, New hires, rehires and terminations Total intermediate risk countries 33 1 34 2011 2010 2009 New hires and rehires 1,754 2,731 1,780 Austria 2 0 2 Terminations 759 753 515 Canada 1 0 1 Denmark 30 1 31 The number of employees dismissed by the LEGO Group in 2011 Germany 16 1 17 has been calculated at 336. (2010: 367) and 2009: 169) Great Britain 2 2 4 Netherlands 2 0 2 Note 3, Number of injuries with absence Switzerland 3 0 3 2011 2010 2009 Sweden 9 0 9 Americas 10 6 7 Total low risk countries 65 4 69 Europe 26 38 54 Total 127 27 154 Total 36 44 61 Only active suppliers with production in high and intermediate risk countries are audited.

Note 4, Injury rate per million working hours N ote 7, Total no. of BOM suppliers audited Q4/2011 2010 2009 Americas 2.4 1.8 2.2 Code of Conduct Quality Europe 2.0 3.3 5.6 Total number of BOM audits 61 47 Total 2.1 3.0 4.8 High risk countries 47 Intermediate risk countries 14

Note 5, Third party audits for main LEGO sites N ote 8, Total no. of major Code of Conduct Certifications non-conformities found at suppliers ISO ISO OHSAS Code of 9001 14001 18001 Conduct High risk countries 57 Intermediate countries 7 Billund, Denmark 1 1 1 n/a Kladno (MC), Czech 1 1 1 n/a Total 64 republic The audits create a dialogue with the suppliers, and the major non- Kladno (Production), 1 1 1 n/a conformities set the main focus for the continuous improvement Czech republic process. Nyregyhaza, Hungary 1 1 1 n/a Monterrey, Mexico 1 1 1 1 The 64 major non-conformities for the Code of Conduct area can be Hong Kong, China 1 n/a n/a n/a summerized as: Slough, UK n/a n/a 1 n/a • 16 related to working hours • 4 related to wages Enfield, USA n/a n/a 1 n/a • 1 related to environment Munich, Germany n/a n/a 1 n/a • 27 related to health & safety Total number of audits 6 5 8 1 • 5 related to underage labour • 1 related to freedom of association Total number of major • 4 related to employement terms non conformities 1 6 4 0 • 2 related to disciplinary pratices • 4 related to integrity, transparency and corruption

46 Definitions and calculation methods

Data have been calculated by consolidating data for the parent Sick leave company (LEGO A/S) with data for all subsidiaries. The consolidation Sick leave is calculated as time lost due to the employees’ own ill- is based on data of a uniform nature and calculated using the same ness. The sick leave is calculated as the number of absence hours methods. However, data relating to health and safety only include as a percentage of the total number of working hours excluding holi- data from plants with more than 100 employees. Similarly, environ- days and non-business days. Only data from sites with more than 100 mental data only comprise production facilities. The measurement employees and LEGO Brand Retail stores are included. method remains unchanged from last year. Injury rate per million working hours Data measurement methods and the basis of calculations are The number of occupational injuries is calculated as the number of addressed below; occupational injuries resulting in at least one day’s absence following the day of the injury. The rate of occupational injuries is calculated per million working hours. Only data from sites with more than 100 C onsumers employees and LEGO Brand Retail stores are included. Number of product recalls Product recalls are calculated as launched products recalled from Absence rate due to injuries the market due to product safety issues and calculated per stock The number of absence hours as a consequence of occupational keeping unit. injuries. The rate is calculated per 1,000 working hours, and the absence is calculated from the day following the injury. Only data from Consumer complaint call rate sites with more than 100 employees and LEGO Brand Retail stores The consumer complaint call rate is calculated as the number of are included. consumer complaints received relating to products launched in the year of reporting as a parts per million (ppm) of the number of Director level and above promotions (externally recruited or products sold in the launch year. Due to the substantial Christmas internally appointed) of female employees trade, and in order to give a true and fair view, complaints received The number of female director levels and above promotions (exter- in January of the following year are also included in the calculation, nally recruited or internally appointed) is shown as a percentage of corresponding to a 13-month period. all promotions into the director level and above group of employees.

Net Promoter Score Index® Employee Pulse In connection with consumer contacts and the LEGO Group’s online At the end of the reporting year, a survey, the Employee Pulse, is sales, randomly selected consumers are asked how likely they are, on carried out in which all employees are asked to evaluate the LEGO a scale from 0-10 (10 = best), to recommend the purchased product Group as a workplace. The questions cover a wide range of the areas or service to others. The development in promoters - level 9 and 10 included in the LEGO Group strategy and measure the employees’ - minus the development in the detractors - level 6-0 - is calculated motivation and commitment. The results are used to identify signifi- and is shown in this Progress Report with 2005 as index basis. cant target areas at Group and departmental level.

New measure is Employee Net Promoter Score (E-NPS) based on the Employees results for the Pulse question “I would recommend the LEGO Group Number of employees as an employer to other people”. The E-NPS is calculated by subtract- Comprises all employees paid by the LEGO Group, including per- ing number of detractors (1-6 on the 10-point scale) from the number manently employed staff, contractually employed staff, and trainees. of active promoters (answering 9-10). The 13 largest LEGO Group em- The statement is calculated at the end of the year and measured as ployment countries are included in the calculation. headcount.

Job classification Partners Senior Management comprises all Vice Presidents or levels above. Percentage of director level and above at LEGO sites trained in Management comprises Senior Directors and Directors. The director business integrity biennially level and above consists of Senior Management and Management. The percentage is calculated as director level and above (employed Other employees are included in the group “Others”. for more than three months) having completed the e-learning programme in Business Conduct biennially as a percentage of all direc- Rate of employee turnover tor level and above (employed for more than three months) in the Employee turnover is measured as the number of permanent em- LEGO Group. ployees who have voluntarily left the LEGO Group during the reporting period compared to the average number of permanent employees Number of audits conducted at main LEGO sites during the reporting period. The average is calculated on the basis The number of audits conducted at LEGO sites is calculated as third of monthly data. The number of new employments and rehires as well party audits connected to the certification process or voluntary Code as dismissals is also stated. of Conduct audits.

47 Number of major non-conformities found at main LEGO sites Surrounding environment (Quality/EHS/CoC) Raw materials The number of major quality, EHS and Code of Conduct non-con- Raw materials are calculated as plastic granulate used in manufac- formities found during third party audits conducted at LEGO sites. turing at LEGO sites.

Percentage of major quality, EHS and Code of Conduct non- Water consumption conformities found at audits at main LEGO sites solved in Water consumption is calculated as the quantity of water supplied to accordance with corrective action plans the LEGO Group. Only data from LEGO Group sites with production The percentage of major quality, EHS and Code of Conduct non- are included. conformities found by third party audits at main LEGO sites which have a deadline for the corrective action in the reporting year and Energy consumption which have been solved within the agreed deadline. Energy consumption is calculated as the total energy in the form of electricity and heating supplied to the LEGO Group. Only data from Data relating to suppliers and business partners the LEGO Group sites with production are included. The number of suppliers includes the LEGO Group’s active direct suppliers calculated at the end of the reporting period. The number Energy efficiency improvement is broken down into direct suppliers and extended line suppliers. The energy efficiency improvement is calculated as the rate between Direct suppliers deliver bill of material (BOM) components whereas energy consumption and raw materials used. The data is shown with extended line suppliers primarily deliver merchandise. Suppliers do the previous year as baseline. Only data from LEGO Group sites with not include indirect purchases. The number of suppliers who have production are included. been audited is calculated as the number of suppliers visited with a view to formalized monitoring and reporting of compliance with quality Waste standards or Code of Conduct. The number of significant discrepan- Waste is calculated as the recorded quantities of waste disposed cies is reported. These form the basis of the continued dialogue with from the LEGO Group. Only data from LEGO Group sites with produc- the suppliers in order to continuously work on improvements. tion are included.

Percentage of major quality non-conformities found at supplier Recycled waste audits solved in accordance with corrective action plans The recycled waste percentage is calculated as the recycled quanti- The percentage of major quality non-conformities found at suppliers ties of waste disposed compared to total quantities of waste disposed. which have a deadline for the corrective action plan in the reporting Only data from LEGO Group sites with production are included. year and which has been solved within the agreed deadline.

Percentage of major Code of Conduct non-conformities found at supplier audits solved in accordance with corrective action plans The percentage of major Code of Conduct non-conformities found at audited suppliers which have a deadline for the corrective action in the reporting year and which have been solved before the agreed deadline. Non-conformities found at ICTI Care certified suppliers are not included.

Customer Pulse To obtain an evaluation of the cooperation with retail customers in the reporting year, they are asked to give their perceived evaluation of the LEGO Group during January and February of the following year. The survey is used to track performance within the following six categories: 1) Overall satisfaction, 2) Products - questions are asked regarding innovation, packaging, assortment size etc. 3) Marketing – performance is tracked on the effectiveness of customer, in-store and promotion marketing etc. 4) Service – customers rate the LEGO Group regarding e.g. order lead-time, quality in delivery, on-time delivery etc. 5) Partnership – performance is tracked on joint planning, information sharing etc. 6) Value – questions related to stock turns, trading terms etc. are in focus. The consolidated data are shown in this Progress Report with 2005 as index basis.

48 Assurance statement

Assurance Statement for LEGO Group’s stakeholders from the independent auditor.

We have reviewed the consolidated non-financial data of the LEGO review of underlying documentation, including review of whether the Group’s Progress Report for 2011 as expressed on pages 45-46. scope of the 2011 non-financial data complies with described accounting policies for the 2011 non-financial data. During the review Criteria for preparation of the Progress process, we have visited entities in Billund, Kladno and Enfield. Report’s non-financial data The criteria for preparation of the Progress Report’s non-financial C onclusion regarding the 2011 Progress data are the accounting policies described on pages 47-48. These Report’s non-financial data contain information concerning which of the Group’s business areas Based on our review, nothing has come to our attention causing us and activities are included in the reporting, types of data, and Man- not to believe that the consolidated non-financial data of the Pro- agement’s reasons for choosing the data included. The non-financial gress Report of LEGO Group for 2011 have been presented in ac- data are factored in accordance with the accounting policies de- cordance with the stated criteria. scribed on pages 47-48.

Delegation of responsibility Copenhagen, 21 February 2012 Company Management is responsible for preparing the Progress Re- port’s non-financial data, including for establishing registration and PricewaterhouseCoopers internal control systems with a view to ensuring reliable reporting, Statsautoriseret Revisionspartnerselskab specifying acceptable reporting criteria as well as choosing data to be collected. Our responsibility is, on the basis of our work, to express an opinion on the 2011 Progress Report’s non-financial data.

Scope of our work We have planned and completed our work in accordance with the International Auditing Standard ISAE 3000 (assurance engagements Henrik Kragh other than audits or review of historical financial information) for the State Authorised Public Accountant purpose of obtaining limited assurance that the non-financial data presented on pages 45-46 have been computed in accordance with the stated criteria.

The obtained assurance is limited compared to that of an engagement with reasonable assurance. Our work has thus - based on assessment of materiality and risk – comprised inquiries regarding applied registration systems and procedures, review of data used Birgitte Mogensen in connection with preparation of the 2011 non-financial data, and State Authorised Public Accountant

49 GRI and Global Compact overview and index

Section GRI (Profile / Performance Indicator) GC (principle no.) Welcome to Progress Report 2011 1.2, 2.1, 3.2, 3.3, 3.5, 3.6, 4.12, 4.15, 4.17 1-6, 10 Table of contents 3.4 2011 highlights Sustainability - the LEGO way Message from the CEO 1.1, 2.8 The LEGO way Our sustainability issues Sustainable play 4.16, PR8 Learning through systematic creativity Build The Change: Building our Green City of the Future 4.16 Quality systems in place 4.13, PR1 Meeting our consumers’ needs and exceeding their expectations 4.16 Consumer complaints 4.16 Product safety PRI, PR3 Marketing to children PR6 Online safety PRI, 4.16 Environment 7, 8, 9 Our production 9 Our global material approval process EN1 7 Zero waste EN2, EN22 8 Smaller boxes meet consumer needs and save CO² and waste EN26 9 Design for Disassembly of LEGO® elements EN26 9 Sustainable packaging EN26, EN27 9 Climate 7, 8, 9 Energy efficiency and consumption EN3, EN5, EN6, EN7 8, 9 Greenhouse Gas Account EN7, EN16 8 Improving transport EN18, EN29 9 Employees 1-6 Safety at the LEGO Group LA7, LA8 EHS non-conformities at main LEGO sites LA7 Increased focus on diversity in 2012 LA13 Occupational health of the LEGO employees LA2 Motivation and satisfaction Work-life balance Cultural and gender diversity LA13 Attracting and integrating new talent globally Stakeholder dialogue 4.14, 4.16 Lobbying activities 4.13, 4.16, SO5 Dialogue with NGOs 4.16 Tax and other economic impacts Engaging with consumers 4.16 Consumer satisfaction 4.16 Knowing our customers better 4.16 Co-operation in 2011 Human rights HR6, SO1 1, 2 Human rights strategy 4.8 1 Human rights impact assessment process 1 Children’s rights HR6 2 Our Code of Conduct 4.8, SO3, SO4 1-6, 10

50 Section GRI (Profile / Performance Indicator) GC (principle no.) Governance Good governance in a family-owned company 2.3, 2.6, 4.1, 4.2, 4.9 Board of Directors 2.3, 4.1, 4.2, 4.3, 4.7, 4.9, 4.10 Business integrity training SO3 Corporate Management 2.3, 4.1, 4.2, 4.6, 4.9 Creating value with four promises 4.8 Policies 4.9 Whistle Blower 4.4 10 The LEGO Foundation EC1 Related Foundations 4.16, EC10 Care for Children in Need 4.16, EC10 Care for Education 4.16, EC10 Care for LEGO Local Communities 4.16, EC10 Capital of Children SO1 Performance data 2.8, 4.16, EN1, EN4, EN8, EN22, HR2, LA1, LA7, PR2, 1-6, 8, 10 PR5, PR8 EC1, EC10 Notes to performance data 2.5, LA1, LA13 Definitions and calculation methods Assurance statement 3.13 GRI and Global Compact overview and index 3.12 The LEGO Group Aastvej 7190 Billund Denmark Tel.: +45 79 50 60 70 Progress Report 2011 www.LEGO.com The LEGO Group

Annual Report

In the Annual Report you will find detailed information on the LEGO Group’s financial results for 2011.

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